E-transactions may bring more tax benefits to individuals, shopkeepers
June, 19th 2015
Financial transactions through electronic means, such as net banking, may give you some rebate on income tax, according to the various incentives in the draft proposal put out by the Government to boost electronic transactions.
“Benefits in terms of income tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means,” says the proposal, adding that tax benefits can be provided to merchants for accepting electronic payments, for example an appropriate tax rebate can be extended to a merchant if at least, say, 50 per cent value of the e-transactions is done electronically.
Alternatively, 1-2 per cent reduction in value-added tax can be considered on all e-transactions by merchants,” says the proposal, that has been placed on www.mygov.in, and for which comments are invited by June 29.
The proposal comes in response to this year’s Budget announcement aimed at curbing the black money menace. “One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians have or can have, a Rupay debit card, I therefore, propose to introduce soon several measure that will incentivise credit or debit card transactions and disincentivise cash transactions,” Finance Minister Arun Jaitley had said.
The proposal defined e-transactions as those in which the customer authorises the transfer of money through electronic means, and the funds flow directly from one account to another. These accounts can be held in banks, or with prepaid instrument providers. The transfers can be done through means of cards (debit /credit), mobile wallets, mobile apps, net banking, Electronic Clearing Service, National Electronic Fund Transfer, Immediate Payment Service, or other similar means.
It suggests considering a nominal cash handling charge on transactions higher than a specified level. Also, it should be mandatory to settle high value transactions of, say, more than ?1 lakh, only electronically.
The aim of the proposed policy is to provide necessary incentives to replace cash use, either in government transactions, or in regular commerce over a period of time.
The proposal lists many objectives, such as improving the ease of conducting transactions for an individual, building a transaction history to enable improved credit access and financial inclusion, reducing the risks and costs of carrying cash at the individual level and lowering costs of managing cash in the economy. It will also help in reducing tax avoidance and the impact of counterfeit money.